Houston METRO

Subject: Buy America Waiver Request

Dear Mr. Wilson:

I write in response to your letters dated March 6 and March 23, 2009, in which you ask the Federal Transit Administration (FTA) to waive its “Buy America” requirements for two pilot Light Rail Vehicles (LRVs); such a waiver would allow the pilot LRVs to be assembled in Spain by Construcciones y Auxiliar de Ferrocarriles (CAF). I have also received a letter dated April 9, 2009, from Pauline E. Higgins, Esq., the General Counsel to the Metropolitan Transit Authority of Harris County (METRO), regarding the lease of the two pilot LRVs for purposes of testing. After careful consideration, I have decided to deny your request for a waiver from the Buy America requirements, for the reasons stated below:

Background

According to your letter of March 23, METRO, through Parsons Transportation Group (PTG), its Facility Provider, is prepared to award a contract to CAF to acquire a base quantity of 103 LRVs for your METRO Solutions Corridors. You indicate that the initial Notice to Proceed will be for mobilization, engineering, and an order of 29 LRVs for the federally funded North and Southeast corridors.

CAF has asked for a Buy America waiver despite signing a Certificate of Compliance with FTA’s Buy America requirements. You argue that FTA should permit CAF to assemble the pilot LRVs in Spain for the following reasons:

CAF has proposed to offer 100% low floor LRVs for the first time in the United States;

CAF needs to make the LRVs suitable for the Houston environment, fully compliant with Buy America and the Americans with Disabilities Act and other legal requirements contained in Houston METRO’s Request for Proposals (RFP); and

CAF’s engineering staff is located at its plant in Spain. Changes in the engineering and manufacturing processes can be handled more efficiently at CAF’s plant in Spain. The resulting vehicle design will become a guide for the remaining LRVs that will be produced in United States at CAF’s plant in Elmira, New York.

I note that METRO was aware of FTA’s Buy America requirements and knew that these requirements would apply to the LRVs being purchased with Federal grant funds. On February 26, 2008, FTA responded to an inquiry from a prospective supplier of LRVs that informed FTA that METRO had issued an RFP for LRVs that did not include a notice of the Buy America provision, as required by 49 C.F.R. 661.13; METRO received a copy of that response. Moreover, by letter dated March 6, 2008, then-FTA Administrator James Simpson informed METRO of several issues that could affect the progress of METRO’s North and Southeast Corridor projects, and explained, specifically, that METRO’s LRV procurement must comply with the Buy America requirements.

Legal Standard

With certain exceptions, FTA’s Buy America requirements prevent FTA from obligating an amount of Federal funds that may be appropriated to carry out its program for a project unless “the steel, iron, and manufactured goods used in the project are produced in the United States.”[1]

For rolling stock procurements, specifically, FTA’s Buy America requirement is twofold: (1) the cost of the components and subcomponents produced in the United States must total at least 60 percent of the cost of all components in the rolling stock; and (2) final assembly of the rolling stock must occur in the United States.[2]

FTA may grant an exception to its Buy America requirements, however, if applying the requirements “would be inconsistent with the public interest.”[3] Public interest waivers are very difficult to obtain. FTA requires a clear nexus between the item requested and the beneficial impact on the public. In determining whether the conditions exist to grant a public interest waiver, the Administrator will consider all appropriate factors on a case-by-case basis.[4]

FTA implements the Buy America requirements in a manner that takes into account the realities of the industry and the practical necessities of foreign assembly of prototype vehicles in appropriate circumstances. For this reason, FTA has granted public interest waivers when schedule delays would result in a negative impact the traveling public.[5] However, absent factors like safety[6] or the introduction of significant new technology,[7] FTA has consistently denied requests for public interest waivers that are predicated on convenience for the manufacturer or a cost saving of less than 25 percent.[8]

To ensure compliance with its Buy America requirements, FTA grantees must include a Buy America provision in their procurement documents.[9] Such notice must require, as a condition of responsiveness, that the bidder or offeror submit with the bid or offer a completed Buy America certificate in accordance with 49 C.F.R. 661.12.[10]

Bidders or offerors must sign one of the two forms of certificate set forth at 49 C.F.R. 661.12: the Certificate of Compliance or the Certificate of Non-Compliance. By signing a Certificate of Compliance, a bidder or offeror “certifies that it will comply with the requirements of 49 U.S.C. § 5323(j), and the applicable regulations of 49 C.F.R. 661.11.”[11] By signing a Certificate of Non-Compliance, a bidder or offeror “certifies that it cannot comply with the requirements of 49 U.S.C. § 5323(j), but may qualify for an exception to the requirement.”[12] A bidder or offeror “is not permitted to change its certification after bid opening or submission of a final offer. Where a bidder or offeror certifies that it will comply with the applicable Buy America requirements, the bidder, offeror, or grantee is not eligible for a waiver of those requirements.”[13]

Decision

In this instance, METRO has requested a public interest waiver after CAF signed a Certificate of Compliance with FTA’s Buy America requirements. METRO’s request is based on an argument that, because CAF’s engineers reside in Spain, allowing final assembly of two pilot LRVs to take place in Spain would be more efficient than addressing the technical, quality control, reliability, and process related issues in the United States. The issues before FTA, therefore, are (1) whether to allow a waiver after a bidder or offeror has signed a Certificate of Compliance with FTA’s Buy America requirements; and (2) whether it is in the public interest to grant a public interest waiver for reasons of convenience alone.

CAF is ineligible for a waiver in this instance because it has signed a Certificate of Compliance with FTA’s Buy America requirements. As set forth at 49 CFR 661.13(c), “[w]here a bidder or offeror certifies that it will comply with the applicable Buy America requirements, the bidder, offeror, or grantee is not eligible for a waiver of these requirements.” CAF is bound by its Certificate of Compliance. Obviously, given that a Certificate of Compliance was a condition of responsiveness to METRO’s RFP, any grant of a Buy America waiver after CAF has certified compliance would prejudice other manufacturers that submitted offers or proposals to METRO.

I find, moreover, that the two pilot LRVs are integral to CAF’s proposal on which it certified compliance with the Buy America requirements and won the competition for METRO’s procurement of LRVs. Thus, for purposes of Buy America, the pilot LRVs cannot be separated from METRO’s contract with CAF for production and assembly of LRVs for use on the North and Southeast corridors.

Waiving FTA’s Buy America requirements for reasons of convenience alone is not in the public interest. Certainly, FTA has granted public interest waivers for pilot vehicles in the past. Unlike those previous procurements, however, this procurement does not involve the introduction of significant new technology, nor has METRO stated how a waiver would benefit the traveling public.

Therefore, after carefully reviewing the facts in light of the law and FTA’s past decisions, I find that METRO has not established sufficient grounds for a public interest waiver. For the foregoing reasons, I hereby deny METRO’s request for a public interest waiver of FTA’s Buy America requirements of 49 U.S.C. § 5323(j), as implemented by 49 C.F.R. Part 661.

Please feel free to contact Jayme L. Blakesley of my office at (202) 366-0304 or jayme.blakesley@dot.gov with any questions you may have.

[5] Letter dated February 1, 2001, from FTA Deputy Chief Counsel to Port Authority of Allegheny County (FTA granted a public interest waiver to the Port Authority of Allegheny County (Port Authority) for final assembly of two remanufactured and two new prototype light rail vehicles. The waiver prevented a nine month delay in the Port Authority’s reconstruction of its Overlook Line. Such delay would have negatively affected 27,000 existing riders and 14,000 new riders).

[7] 73 Fed. Reg. 46350 (August 8, 2008) (FTA found that quick and successful deployment of fuel cell bus technology and infrastructure is in the public interest. Fuel cell technology will benefit the environment by lessening carbon emissions and decreasing the use of petroleum and other fossil fuels. Allowing foreign technologies will allow the project teams to focus on commercial viability instead of having to make fundamental advances independent of existing technology. Ultimately, this will lead to increased domestic demand for fuel cell bus technology and infrastructure, resulting in a sustainable U.S. market).